Tuesday, December 18, 2018
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Remedying Major Trade Problems with China

by Hon. David Kilgour

Two of the major obstacles to a sustained world economic recovery are Beijing's continued swamping of export markets with its seriously manipulated currency and its export of products from forced labour camps. Manipulated Currency China's trade partners should declare simultaneously next month (when the American Treasury secretary is bound to make his own finding on the point) that China is a currency manipulator.

Manipulated currency amounts to both an export subsidy and a tariff on imports. We should in concert also indicate then that we intend to add 40%, or whatever amount the WTO or IMF finds in an expeditiously-done study is the correct figure, as countervail duty to the price of any product imported from China as of a specified date unless a realistic value is obtained by a cleanly floating yuan.

There is little point waiting for the party-state in China to allow economics rather than administrators to dictate the price of the yuan. Premier Wen Jiabao was recently the latest to indicate that his government has no intention of doing anything substantive about the abuse.

The creation or restoration of manufacturing jobs in Canada and elsewhere would be one positive consequence of this initiative. China's central bank over the past decade has in essence used export revenues to buy about $2.4 trillion in American Treasury bills, presumably in large measure as a means of keeping its currency at a level which provides an enormous and unfair advantage for its exports. Forced Labour Exports In researching our report on allegations that Falun Gong practitioners were being killed for their organs in China, David Matas and I visited about a dozen countries to interview practitioners who had been sent to forced labour camps, but who had later managed to leave the camps and the country itself.

They told us of working in appalling conditions for up to sixteen hours daily with no pay, little food, cramped sleeping conditions together on the floor, and torture. Their labour involved making export products, ranging from clothing to chopsticks to Christmas decorations, no doubt as unnamed subcontractors to exporters.

One estimate of the number of these so-called 're-education through labour' camps across China as of 2005 was 340, with a capacity of about 300,000 workers. Other estimates of the numbers of inmates are much higher. In 2007, a US government report estimated that at least half of the inmates in the camps were Falun Gong.

The combination of totalitarian governance and 'anything is permitted' economics allows such inhuman export production to persist. Changing Other Ways in which Trade is Done with China The Nobel laureate economist Paul Krugman has predicted that Beijing's ongoing refusal to let its currency float will cause retaliation from economies where high unemployment can be traced in part to both Beijing's ongoing refusal to let the yuan rise and its manufacturing megafocus in a world struggling with overcapacity.

The party-state continues to dump consumer goods--no doubt including many made by Falun Gong in forced labour camps -- at lower-than-cost prices in foreign markets. The manipulated currency creates an enormous competitive advantage for China and forces many workers from Canada and across the world out of work. Krugman also says that by displacing the output of foreign producers with its own low-wage goods, China is arguably the prime culprit in holding back a robust recovery in global economies. Peter Navarro, author of The Coming China Wars, and a professor at the University of California, argues that consumer markets across the world have been 'conquered' by China largely through cheating on trade practices.

These include export subsidies, widespread counterfeiting and piracy of products, currency manipulation, and environmental, health and safety standards so lax and weakly enforced that they have made China a very dangerous place to work and breathe.

For all countries trading with China, Navarro has comprehensive proposals which are intended to ensure that commerce becomes fair. Specifically, he says all trading partners must:

• refrain from illegal export subsidies and currency manipulation, and abide by the rules of the WTO;

• define currency manipulation as an illegal export subsidy and add it to other subsidies when calculating anti-dumping and countervail penalties;

• respect intellectual property; adopt and enforce health, safety and environmental regulations consistent with international norms; • ban the use of forced labour and provide decent wages and working conditions;

• adopt a 'zero-tolerance' policy for anyone selling or distributing pirated or counterfeit goods;

• block defective and contaminated food and drugs by measures which make it easier to hold importers liable for selling foreign products that do harm or kill people or pets; and

• include strong provisions for protection of the natural environment in all bilateral and multilateral trade agreements in order to reverse the ‘race to the environmental bottom' in China.

The trade deficits of countries like our own with China as a result of its cheating in areas such as these are obscene and growing. Governments which care about their own people and their jobs, as well as the terrible working conditions in China, must act now to end the party-state's violations of solemn undertakings given at the time of its accession to the WTO in 2001 .

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